midterm Flashcards
four basic questions
what goods and services should be produced to meet consumer needs, how should they be produced, who should produce them, who should receive them
traditional economy
economic system rooted in tradition, culture, customs, etc. (ex: fishing, bow and spear hunting)
command economy
economic activity controlled by a central authority (ex: vietnam, china, cuba)
market economy
economic system where economic decisions and prices are guided by interactions of the consumers (ex: us, uk, japan)
productivity
efficiency, cost of production is the total of certain costs associated with the production of goods
demand
the amount of goods and services customers are willing able to buy at a given price
supply
the amount of goods and services available in the market
law of demand
quantity purchased has inverse relationship, opposite direction (the higher the price, the lower the quantity demanded and the lower the price, the higher the quality demanded)
law of supply
direct relation between price and quantity, same direction (the lower the price, the lower the quantity supplied and the higher the price, the higher the quantity supplied)
equilibrium price
the quantity of goods supplied is equal to the quantity of goods demands
price elasticity
the degree buyers and sellers respond to price changes
price ceiling
limit on how high a price is charged for a product
price floor
lowest legal price an item can be sold
sole propiretorship
a business owned and operated by one person
partnership
when two or more people join together as co-owners
corporation
business organization most often created by under state laws, can legally enter into agreements, can own property and be sued
franchise
legal contract that gives a franchisee the right to use company’s trademark or trade name, business sytems, and process to produce and market a good or service
cost
value a producer gives up to produce a good or service
conglomerate
corporation made up of several different, independent businesses
price
amount of money that is needed to buy something
w-4 form
will fill this out to let my employer know how much to withhold from my paycheck
form w-2
receive this from my employer that lets me know how much money i made last year and how much was withheld for state, local and federal taxes
anticipated income
the amount of income the applicant can reasonably be expected to receive during the calendar year
discretionary income
money left over after a person pays their taxes
unanticipated income
surplus when the state has more resources available for the upcoming year
required deductions
an employer is legally obligated to withhold this money from an employee’s payroll check based on federal and state laws
voluntary deductions
taken for programs in which individuals participate voluntarily (ex: health, insurance, retirement)
examples of public goods
law enforcement, national defense, etc.
fixed expenses
remain the same price
variable expenses
price can change
assets
the items your company owns that can provide future economic benefit (securities, jewelry, home)
liabilities
what you owe to other (taxes, rent, or mortgage payments)
perfect competition
large number of firms who sell an identical product, no single firm can affect the market price, firms are free to enter and leave market at will, each firm is independent (ex: farmers market where each vendor sells the same type of jam)
monopoly
single producer controls an industry, no competition, limited choice and higher prices for consumers
comparison shopping
ability to compare prices on products across different retailers and choose the store where the product is cheapest
competition
rivalry among sellers in the same market to win customers
smart goal
specific, measurable, achievable, relevant, and time-based
unitary elastic demand
change in product price causes equal change in the quantity demanded
merger
joining of two firms to form a single firm
choice
deciding how to best use limited resources
economics
study of how society chooses to use scarce resources to produce goods and services to satisfy unlimited consumer wants and needsn
need
a requirement of survival
trade-off
all the options you give up when you make a choice
opportunity cost
the value of the next best option you gave up when you have a choice
resources
money, materials or other items that can be used to meet a want or need
scarcity (scarce)
when humans want more of a resource than is available (resource is limited)
utility
how useful and satisfying something is to us
want
something desired but not essential
oligopoly
small number of firms dominate an industry, high start up costs and obstacles
monopolistic competition
all the same qualities of perfect competition, except for identical produts. they sell similar products, but have their own uniqueness.
product differentiation
process of creating differences between similar goods and services
price leadership
dominant firm sets price and smaller firms follow
collusion
producers get together to illegally set prices
cartels
formal organization of producers that agree to coordinate prices and production; illegal in us
natural monopoly
situation where cost of production is minimized by having only one firm
us economy is driven by interaction of __ and __
producers and consumers
driving force for producers
profit
driving force for consumers
getting the “biggest bang for your buck”
inelastic demand
demand responds slightly or not at all to a change in price (medication, gas, salt)
elastic demand
demand responds to a change in price (cars, furniture, transportation devices)
total costs formula
total fixed costs + variable costs TIMES quantity
break even prices formula
total costs DIVIDED by quantity
price formula
break even price + profit
productivity formulas
output number/hours worked or output number TIMES unit price
